Correlation Between Owens Corning and Quanex Building

Can any of the company-specific risk be diversified away by investing in both Owens Corning and Quanex Building at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Owens Corning and Quanex Building into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Owens Corning and Quanex Building Products, you can compare the effects of market volatilities on Owens Corning and Quanex Building and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Owens Corning with a short position of Quanex Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Owens Corning and Quanex Building.

Diversification Opportunities for Owens Corning and Quanex Building

0.72

Correlation Coefficient

Owens Corning  Quanex Building

Poor diversification

The 3 months correlation between Owens and Quanex is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Owens Corning and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products and Owens Corning is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Owens Corning are associated (or correlated) with Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of Owens Corning i.e., Owens Corning and Quanex Building go up and down completely randomly.

Pair Corralation between Owens Corning and Quanex Building

Allowing for the 90-day total investment horizon Owens Corning is expected to generate 0.68 times more return on investment than Quanex Building. However, Owens Corning is 1.48 times less risky than Quanex Building. It trades about 0.07 of its potential returns per unit of risk. Quanex Building Products is currently generating about 0.01 per unit of risk. If you would invest  9,899  in Owens Corning on October 3, 2024 and sell it today you would earn a total of  7,133  from holding Owens Corning or generate 72.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Owens Corning  vs.  Quanex Building Products

Owens Corning

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Owens Corning has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Owens Corning is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Quanex Building Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quanex Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Owens Corning and Quanex Building

The main advantage of trading using opposite Owens Corning and Quanex Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Owens Corning position performs unexpectedly, Quanex Building can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Quanex Building will offset losses from the drop in Quanex Building's long position.

The idea behind Owens Corning and Quanex Building Products pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.